What Is Cost of Living?
Your annual cost of living is the total amount of money you need to cover your yearly expenses and maintain your lifestyle. This amount can vary from person to person. Some people choose to spend more, while others live more simply.
So what is included in your cost of living? Any expense tied to your daily life should be part of your total. These expenses may include:
- Mortgage or rent payments
- Major home improvements and furnishings
- Loans (such as auto, home equity, or debt consolidation)
- Federal, state, and local income taxes
- Real estate and other taxes (such as sales or capital gains taxes)
- Utilities
- Food
- Clothing, laundry, and dry cleaning
- Education costs
- Child care
- Car expenses (gas, repairs, maintenance)
- Other transportation costs (bus, train, parking, tolls)
- Insurance (life, home, auto, medical, dental, disability)
- Entertainment and dining
- Recreation and travel
- Membership dues
- Hobbies and sports
- Gifts
- Professional services (tax, legal, etc.)
- Charitable donations
- Miscellaneous expenses
Once you list your current expenses, you can begin estimating your cost of living in retirement.
How Does Cost of Living Change When You Retire?
Your cost of living in retirement may increase or decrease depending on your choices and circumstances. You might downsize your home or move to a more expensive area. Your goals for retirement will shape your future expenses and influence how much you may want to save.
Here are some ways your expenses may change.
What Lifestyle Factors Can Increase Your Cost of Living?
Certain choices can raise your expenses in retirement:
- Moving to a more expensive area can raise your overall costs.
- Traveling more often can add costs for transportation, lodging, and activities.
- Supporting adult children or grandchildren can affect your monthly cash flow.
- Having family members move in with you can increase food and utility costs.
- Paying for a child’s or grandchild’s education can add large expenses.
- Health care costs may rise. Medicare may cover some expenses, but you will probably need to budget for Medicare supplement insurance as well to help pay for copayments, coinsurance and deductibles. This additional insurance may end up increasing your cost of living expenses.
- Starting a small business can require startup costs and ongoing expenses.
What Lifestyle Factors Can Decrease Your Cost of Living?
Other choices may lower your expenses:
- Moving to a lower-cost area can reduce overall spending.
- Paying off your mortgage before retirement removes a major monthly bill.
- Downsizing your home may reduce housing and maintenance costs.
- Selling a car can lower expenses for insurance, gas, and repairs.
- Reviewing your life insurance coverage may help reduce premium costs if your needs have changed.
As you estimate your future income and expenses, think about your needs and lifestyle to build a realistic picture of your retirement cash flow.
Cost of Living & Social Security
When you begin receiving Social Security benefits, your payments may increase over time through cost-of-living adjustments (COLA) to your monthly payment. The most recent COLA was 2.8%, effective in January 2026.1 These adjustments are based on changes in the Consumer Price Index (CPI), which tracks inflation.2
Using This Retirement Cost of Living Calculator
Our Retirement Cost of Living Calculator lets you list your pre-retirement and post-retirement income and expenses. This helps you compare your current cash flow with what you expect in retirement.
After you enter your income and expenses, your results will show whether your retirement income, expenses, and net cash flow increase or decrease. You will also see a bar graph that summarizes changes in your cash flow at retirement.
You can also review a detailed data table. It shows the differences between your current income sources and your retirement income, along with changes in your living expenses.
About Your Inputs
Our Retirement Cost of Living Calculator asks you to choose a frequency for your calculations. It then provides fields where you can enter your income and expenses before and during retirement.
Assumptions
This section asks you to choose how you want to enter your numbers.
- Monthly or Annual Figures: You can choose to enter either monthly or yearly amounts for your income and expenses.
Itemized Income
This section asks you to list all sources of income. Enter total dollar amounts for each category for both pre-retirement and post-retirement.
- Wages, Salary and Tips: Include all income from full-time or part-time jobs.
- Received Alimony and Child Support: If you receive payments from a former spouse, include both alimony and child support.
- Dividends from Stock: Include income from investments such as stocks, bonds, or mutual funds.
- Interest On Savings Accounts and CDs: Include any interest earned from savings accounts or certificates of deposit.
- Social Security Benefits: If you receive Social Security payments, include that amount here.
- Pensions: If you receive a pension from an employer, include the total amount.
- Other Income: List any other income sources, such as rental income or trust payments. For retirement, include withdrawals from accounts like a 401(k), 403(b), 457 plan, or IRA.
Itemized Expenses
This section asks you to list all expenses. Enter total dollar amounts for each category for both pre-retirement and post-retirement.
- Mortgage Payment or Rent: Include your monthly mortgage or rent payment.
- Vacation Home Mortgage: If you own a second home, include that mortgage payment.
- Automobile Loans: Include payments for any car loans.
- Personal Loans: Include payments for personal loans used for debt consolidation, home projects, or large purchases.
- Charge Accounts: Include the total amount you pay toward credit cards or other charge accounts.
- Federal Income Taxes: This is the total amount you pay in federal taxes each year based on your income.
- State Income Taxes: Include the total amount you pay in state taxes each year.
- FICA (Social Security Taxes): FICA stands for Federal Insurance Contributions Act. It includes taxes that fund Social Security and Medicare. Employees have this deducted from their paycheck. Self-employed individuals pay the full amount.
- Real Estate Taxes: If you own property, include your annual property taxes based on its assessed value.
- Other Taxes: Include any other taxes you pay, such as estate, inheritance, capital gains, or sales taxes.
- Utilities: Include costs for water, gas, electricity, internet, and cable.
- Household Repairs and Maintenance: Include costs for home repairs and regular upkeep, such as fixing leaks or painting.
- Food: Include grocery expenses for your household.
- Clothing and Laundry: Include spending on clothing, laundry, and dry cleaning.
- Educational Expenses: Include tuition, fees, and room and board for yourself or your children.
- Child Care: Include daycare, babysitting, or nanny costs.
- Automobile Expenses: Include costs for gas, maintenance, and repairs.
- Other Transportation Expenses: Include public transportation, rideshare services, parking, and tolls.
- Life Insurance Premiums: Include payments for life insurance policies.
- Homeowners or Renters Insurance: Include the cost of insuring your home or belongings.
- Automobile Insurance: Include your car insurance premiums.
- Medical, Dental, and Disability Insurance: Include premiums for health, dental, and disability coverage.
- Entertainment and Dining: Include spending on restaurants, movies, concerts, and other events.
- Recreation and Travel: Include spending on hobbies, sports, and travel.
- Club Dues: Include membership fees for gyms, clubs, or organizations.
- Hobbies: Include costs for hobbies such as crafts, music, or outdoor activities.
- Gifts: Include spending for birthdays, holidays, and other occasions.
- Major Home Improvements and Furnishings: Include costs for large home projects and furniture purchases.
- Professional Services: Include fees for services such as legal help, tax preparation, or housekeeping.
- Charitable Contributions: Include donations to charities or other organizations.
- Other and Miscellaneous Expenses: Include any additional expenses not listed above, such as subscriptions or bank fees.
About Your Results
Based on your inputs, this calculator shows the changes in your income, expenses, and net cash flow between now and retirement.
A bar graph highlights these changes. It compares your current and projected income, expenses, and annual cash flow using different colors.
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Sources
- Cost-of-Living Adjustment (COLA) Information. https://www.ssa.gov/cola/.
- Consumer Price Index. https://www.bls.gov/cpi/.